Multi-level leverage account structure

ABSTRACT

An investment structure for multiple classes of investors that combines the advantages of both the master feeder structure and the reverse master feeder structure with segregated accounts. In particular, an investment structure is formed in which investors invest in a common fund. The common fund, in turn, opens a common prime brokerage account, having at least three sub-accounts, for example: an unlevered account; one or more levered accounts and a general trading account. The prime broker provides class loans to the levered account and margin loans to the general trading account. To the extent class loans are provided to the levered account, levered investors will participate in the returns on the general account as if the levered investors invested capital plus the amount of any class loans to that levered account. The unlevered investors will participate in the returns on the general trading account on the basis of their capital contributions alone. The prime broker will have no recourse against any assets of any account other than the levered account as a result of a default or margin call of the levered account. In an alternative embodiment of the invention, the investment structure is structured as a fund of funds, in which multiple classes of investors invest, which, in turn, invests in multiple investment funds, or a fund that employs alternative investment strategies that overlay the basic trading strategies. In this embodiment, a credit facility is established with the equivalent of three sub-accounts as discussed above.

BACKGROUND OF THE INVENTION

1. Field of the Invention

The present invention relates to an investment fund structure and moreparticularly to an investment fund structure for multiple classes ofinvestors based upon a managed level of leverage applicable to eachclass, in which the investment fund opens a prime brokerage account witha prime broker having at least three sub-accounts, for example: one ormore Levered Accounts, each of which may provide for a different levelof leverage; an Unlevered Account; and a General Trading Account;through which the prime broker provides margin financing through cashadvances to the General Trading Account and additional financing by wayof class loans to the Leveraged Account and the classes of investorsshare in the returns on the General Trading Account based on differentlevels of leverage. The present invention is also applicable to ainvestment structure in which multiple classes of investors invest in afund of funds, which, in turn, invests in multiple investment funds, ora fund that employs alternative investment strategies that overlay thebasic trading strategies. In such a structure, a credit facility isestablished with a lender with at least three sub-accounts, as discussedabove.

2. Description of the Prior Art

Various investment fund structures providing for levered and unleveredaccounts are known. In order to manage assets in a single portfoliowhile increasing the pool of investment assets, master-feeder investmentstructures are known. In general, master feeder investment structuresinclude multiple feeder funds which invest in a master fund. The masterfund, in turn, undertakes trading activity and provides a return to thefeeder funds.

In order to increase potential gains on investments, private investmentfunds may invest on margin. In particular, Federal Reserve Regulationsallow such funds to invest their own capital, as well as a certainpercentage of borrowed capital typically provided by a prime broker. Theprime broker determines the maximum amount of leverage to be provided.This leverage flows through in the return available to an investor inthe fund. For example, an unlevered investor investing $100 in a fundwith a 10% return would realize a gain of $10. However, an investorinvesting $100 in fund realizing the same 10% return, but also utilizingan additional $100 of borrowed funds, will realize a gain of $20, lessthe cost of funds borrowed (i.e., interest charges, fees, legal costsand similar amounts) for a net return that could be significantlygreater than 10%. Similarly, losses in a leveraged fund will be greaterthan those in an unleveraged fund and will be further increased by thecost of funds borrowed.

In order to provide enhanced leverage, investment structures withmultiple levels of leverage are known. Such investment structuresutilize leverage at two levels: (a) the investor level (i.e., the levelat which investors purchase interests in a fund) and (b) the portfoliolevel (i.e., margin lending). FIGS. 1 and 2 illustrate such investmentstructures, configured in either a master-feeder structure or assegregated accounts, respectively. Referring first to FIG. 1, a knownmaster-feeder investment structure is illustrated with multiple levelsof leverage and generally identified with the reference numeral 20. Asshown, the investment structure includes two classes of investors:unlevered investors 22 and levered investors 24 (although this structurealso could accommodate multiple classes of levered investors). Theinvestors 22 and 24 invest in separate feeder funds 26 and 28,respectively. The feeder fund 26 is an unlevered feeder fund. For everydollar invested by the unlevered investor 22 in the unlevered feederfund 26, one dollar is invested into a master fund 30 and the unleveredinvestor receives one dollar in interests of the master fund 30. On theother hand, the levered investor 28 invests in a levered feeder fund 28,and for every dollar the levered investor 24 invests in the leveredfeeder fund 28, the levered feeder fund 28 borrows one dollar in theform of a class loan from a lender 32. Thus, for every dollar investedby the levered investor 24, two dollars are invested into the masterfund 30, providing leverage at the investor level. In this case, thelevered investor receives two dollars in interests or shares of themaster fund 30, which are pledged as collateral for the class loan. Thecollateral is held by a custodian 31. Based on the above scenario, theunlevered investor 22 and the levered investor 24 invest a total ofthree dollars into the master fund. The funds from the master fund 30are used to open and maintain a prime brokerage account 34.

In this structure, a second level of leverage is provided at theportfolio level in the form of a margin loan provided by the primebroker to the master fund through the prime brokerage account 34.

There are disadvantages of such an investment structure. In particular,because the only collateral for the class loan is the levered feederfund's 28 interest in the master fund 30 and such interests are subjectto redemption, the lender, such as the lender 32, often requiresrelatively high interest rates and higher asset coverage (i.e., lowerloan to value ratio). The lender 32 also may require a guarantee fromthe master fund 30 on a pro rata basis based on the ratio of the leveredfunds to the total funds. Although it may be prudent to require aguarantee, lenders may forego such requirement because of the legalcomplexity and expense. In addition, the documentation required for thisstructure is extensive and typically includes (a) a credit agreementbetween the levered feeder fund 28 and the lender 32, (b) a securityagreement between the levered feeder fund 28 and the lender 32, (c) acustody agreement between the levered feeder fund 28 and the custodian,(d) a control agreement between the lender 32, the levered feeder fund28 and the custodian, (e) a promissory note issued by the levered feederfund 28 to the lender 32 and the custodian, (f) a guaranty and securityagreement between the master fund 30 and the lender 32, (g) anacknowledgment and consent between the master fund 30, the leveredfeeder fund 28 and the lender 32, (h) a prime brokerage agreementbetween the master fund 30 and the lender 32, as prime broker and marginleverage provider, and (i) various ancillary agreements between theleveraged feeder fund 28, the lender 32 and various service providers.This extensive documentation results in significant legal expenses thatmust be incurred to implement the structure.

A second known approach uses a reverse master-feeder investmentstructure with segregated accounts, for example, as shown in FIG. 2. Inthis investment structure, both unlevered investors 38 and leveredinvestors 40 invest directly into a common master fund 42. In thisexample, no leverage is applied at the master fund 42 level. The masterfund 42 then invests in segregated reverse feeder funds 44 and 46. Onefeeder fund 44 is strictly for unlevered funds from the master fund 42while the second feeder fund 46 is for levered funds from the masterfund 46. Each of the feeder funds 44 and 46 opens a separate primebrokerage account 48 and 50. The prime brokerage accounts 48 and 50 aresegregated with only one account obtaining additional margin lending. Inparticular, the prime brokerage account 48 is used for unleveredinvestors 36 while the prime brokerage account 50 is used for leveredinvestor 40.

In this case, leverage is provided only at the level of the primebrokerage accounts 48 and 50 and thus no collateral is required from thelevered investors 40. For each dollar in the prime brokerage account 48,a one dollar margin loan is obtained from the prime broker 52. For eachdollar maintained in the prime brokerage account 50, a three dollarmargin loan is obtained from the Prime Broker 52.

Although the reverse master-feeder investment structure reduces thecosts to the levered investors, there are several disadvantages to suchan investment structure. In particular, the portfolio manager mustexecute two trades for every investment strategy to segregate thelevered trading from the unlevered trading. This results in acumbersome, inefficient means of trading, and more complicated tradereconciliation processes.

In both structures described above, there are ongoing administrative andoperational expenses resulting from the need to create and maintainmultiple entities to achieve the desired leverage at the investor level.Thus, there is a need for an investment fund that solves the variousproblems discussed above by providing an investment fund structure withlegal, operational and cost efficiency.

SUMMARY OF THE INVENTION

The present invention relates to an investment structure that enables aninvestment fund to provide leverage at the investor level in addition toleverage at the portfolio level and does so with greater administrative,legal, operational and cost efficiency than known structures. Inaddition, this structure may offer potentially lower costs of borrowingdue to the greater legal certainty related to the structure. In oneembodiment of the invention, an investment structure is formed in whichinvestors invest in a common fund having multiple classes. The commonfund, in turn, opens a common prime brokerage account, having at leastthree sub-accounts, for example: one or more Levered Accounts, anUnlevered Account and a General Trading Account. The prime brokerprovides class loans to the Levered Account and margin loans to theGeneral Trading Account. To the extent class loans are provided to theLevered Account, levered investors will participate in the returns onthe General Trading Account as if the levered investors contributedcapital plus any class loans made to that Levered Account. The unleveredinvestors will participate in the returns on the General Trading Accounton the basis of their capital contributions alone. The prime broker willcontractually agree that it will have no recourse against any assets ofany account other than the Levered Account as a result of a default byor margin call against the Levered Account.

In an alternative embodiment of the invention, the investment structureis structured as a fund of funds, in which multiple classes of investorsinvest, that in turn invests in multiple investment funds, or a fundthat employs alternative investment strategies that overlay the basictrading strategies. In this embodiment, a credit facility is establishedwith the equivalent of three sub-accounts as discussed above.

The present invention offers significant advantages over the structuresdescribed above. In particular, the present invention requires a singledocument, a prime brokerage agreement, rather than the numerousdocuments that are required in the other structures. This results in asignificant reduction in implementation time and lower legal fees.Because this structure does not require the creation of multiple levelsof entities, there are reduced administrative and operational expenses.Further, because the leverage provider will have a direct securityinterest in the General Trading Account, there is greater legalcertainty for the leverage provider. Finally, the investment structureallows for multiple classes of leverage for the Levered Accounts, whichfacilitates management of the account.

DESCRIPTION OF THE DRAWING

These and other advantages of the present invention will be readilyunderstood with reference to the following specification and attacheddrawing wherein:

FIG. 1 is block diagram of a prior art master-feeder investmentstructure with multiple levels of leverage.

FIG. 2 is block diagram of another prior art investment structure formedas a reverse master feeder configuration with segregated prime brokerageaccounts with multiple levels of leverage.

FIG. 3 is a block diagram of an investment structure with multiplelevels of leverage in accordance with the present invention.

FIG. 4 is an exemplary spread sheet illustrating the operation of theinvestment structure outlined in FIG. 3.

FIG. 5 is a block diagram of an alternative embodiment of an investmentstructure with multiple levels of leverage in accordance with thepresent invention.

DETAILED DESCRIPTION

The present invention relates to an investment structure for aninvestment fund for multiple classes of investors for the purpose ofbuying, selling and investing in securities, commodities, and/or otherinvestment products. The fund may borrow amounts in the normal course ofits investing. Leverage may be used to enable the fund to enhance itsreturns, but also may result in greater losses, as profits and losseswill increase in proportion to the degree of leverage used.

In addition to amounts borrowed at the fund level, the fund will employa second class of leverage on an investor by investor (or class byclass) basis, offering varying amounts of leverage to the differentinvestors or investor classes.

As used herein, investors are classified as either “levered investors”or “unlevered investors.” Levered investors are further classified basedupon the amount of additional leverage the investor would like the fundto utilize. For example, the fund may be formed with multiple classes ofleverage at the investor level, such as 2×, 3×, 4×, etc. Where multipleclasses of leverage are provided at the investor level, a separateLevered Account is opened for each leveraged class. Where all investorsare leveraged at the class level and there are multiple classes oflevered investors, there may be no unlevered investors. In accordancewith an important aspect of the invention, leverage at the account levelcan be actively managed and can be set an any level that is acceptableto the prime broker.

The investment fund in accordance with one embodiment of the presentinvention is used to open one or more customer accounts with a primebroker (i.e., a prime brokerage account). The prime broker willestablish at least three sub-accounts within the prime brokerageaccount, for example: a General Trading Account, an Unlevered Accountand one or more Levered Accounts, in which levered investors may befurther classified by the amount of additional leverage utilized andeach such classification will result in an additional Levered Account.Alternatively, the prime brokerage account can be established with atleast three sub-accounts which include multiple Levered Accounts, noUnlevered Accounts and a General Trading Account. The prime broker willprovide margin financing to the fund through advances to the GeneralTrading Account. The prime broker will also provide additional financingthrough class loans to the Levered Account. This additional leverage maybe in the form of additional margin financing, but such additionalfinancing may be secured only by the assets in the Levered Account. Theassets of the General Trading Account initially are allocated betweenthe Levered Account and the Unlevered Account and among multiple LeveredAccounts as follows:

-   -   The Levered Account Pro Rata Percentage for each Levered Account        will equal (a) the sum of (i) the aggregate initial capital        contributions of the particular class of levered investors,        plus (ii) the aggregate amount of any class loans to such        Levered Account, divided by (b) the sum of (i) the aggregate        initial capital contributions of all investors plus (ii) the        aggregate amount of any class loans.    -   The Unlevered Account Pro Rata Percentage will equal (a) 100%        minus (b) the Levered Account Pro Rata Percentage for all        Levered Accounts.

The Pro Rata Percentages may be adjusted at any time and from time totime to reflect any profits and losses to the General Account and at anytime additional capital contributions are made to the fund or capitalcontributions are withdrawn from the fund.

On a daily basis or more frequently upon the happening of certainevents, such as significant market moves, the prime broker willcalculate the value of the assets in the prime brokerage account todetermine whether additional margin is required to be contributed to theGeneral Trading Account. If the equity in the General Trading Account isless than the sum of (i) total assets in the account multiplied by theminimum equity requirement as determined by the prime broker's risk andmargin policies, plus (ii) the largest amount of any outstanding classloans divided by the Levered Account Pro Rata Percentage of the equityin the account, the prime broker will require the fund to contributeadditional capital to or sell securities in the prime brokerage account(a margin call).

If the prime broker makes such a margin call, the margin requirementwill be allocated between the Levered Accounts and the Unlevered Accountbased upon a calculation of the net equity in each account and the ProRata Percentage of the net equity in the General Account. If the ratioof equity to total assets in an account is less than the minimumrequired by the prime broker, that account will be required to postadditional equity or sell securities in an amount sufficient to causethe ratio to equal or exceed the minimum required by the prime broker.However, the prime broker will not look to the Unlevered Account tocover any shortfall in the Levered Account(s) or one Levered Account tocover any shortfall in another Levered Account. The foregoingdetermination as to whether additional margin is required will be madeas follows:

-   -   First, the prime broker will allocate the total assets in the        General Trading Account among the Levered Account(s) and the        Unlevered Account (if any) based on the Pro Rata Percentage.    -   Second, the prime broker will allocate the margin loan among the        Levered Account(s) and the Unlevered Account (if any) based on        the Pro Rata Percentage.    -   Third, the prime broker will allocate the class loan to the        Levered Account(s).    -   Fourth, the prime broker will calculate the net equity in each        Levered Account(s) as follows: (a) the Levered Account Pro Rata        Percentage of such Levered Account multiplied by total assets        minus (b) the Levered Account Pro Rata Percentage of such        Levered Account multiplied by the margin loan minus (c) the        class loan to such Levered Account. The prime broker will then        determine the ratio of net equity in the Levered Account to        total assets in the Levered Account. If such ratio is less than        the minimum required by the prime broker, additional margin will        be required.    -   Fifth, the prime broker will calculate the net equity in the        Unlevered Account (if any) as follows: (a) Unlevered Account Pro        Rata Percentage of total assets minus (b) Unlevered Account Pro        Rata Percentage of the margin loan. The prime broker will then        determine the ratio of net equity in the Unlevered Account to        total assets in the Unlevered Account. If such ratio is less        than the minimum required by the prime broker, additional margin        will be required.

Levered and unlevered investors (if any) will participate in returns onthe assets in the General Trading Account on the basis of theirrespective Pro Rata Percentages. As a result, to the extent that anyclass loans are provided to the Levered Accounts, levered investors willparticipate in the returns on the General Trading Account as if thelevered investors had invested their capital contributions plus anyclass loans made to that Levered Account, while the unlevered investorswill participate in the returns on the General Account on the basis oftheir capital contributions alone.

The prime broker will contractually agree that it (a) will have norecourse against the assets of any account other than the LeveredAccount to which a class loan was made with respect to an event ofdefault or margin call or the like with respect to the Levered Accountor any other obligation solely related to any borrowing on behalf ofthat Levered Account (a “Levered Account Obligation”); and (b) will haveno recourse against the assets of any account other than the UnleveredAccount with respect to an event of default or margin call or the likewith respect to the Unlevered Account or any other obligation solelyrelated to the unlevered account (an “Unlevered Account Obligation”).The prime broker will solely look to the assets of a Levered Account,including the Levered Account Pro Rata Percentage of the assets of theGeneral Account, to satisfy any Levered Account Obligation applicable tothat Levered Account, and the prime broker will solely look to theassets of the Unlevered Account, including the Unlevered Account ProRata Percentage of the assets of the General Account, to satisfy anyUnlevered Account Obligation

A block diagram of the investment structure in accordance with thepresent invention is illustrated in FIG. 3. As shown, unleveredinvestors 54 as well as levered investors 56 invest in a common MasterFund 58. This example assumes that there are unlevered investors and asingle class of levered investors. The common Master Fund 58 will open aPrime Brokerage Account with a prime broker 62. The Prime BrokerageAccount 60 is formed with three sub-accounts: an Unlevered Account 64, aLevered Account 66 and a General Trading Account 68. For purposes ofthis example, a single Levered Account is shown, although as notedabove, the structure could accommodate multiple Levered Accounts, eachproviding differing levels of leverage. The Prime Broker 62 provides twolevels of leverage to the Prime Brokerage Account. First, the PrimeBroker 62 provides class loan financing to the Levered Account 66.Second, the Prime Broker 62 provides margin financing to the GeneralTrading Account 68.

In this example, the unlevered investors 54 and the levered investors 56invest directly into the Master Fund 58. In this example, the leveredinvestor class is assumed to be leveraged at twice the investor'scapital contribution. The Master Fund 58 opens a Prime Brokerage Accountwith three sub-accounts: an Unlevered Account 64, a Levered Account 66and a General Trading Account 68. The unlevered investors 54 invest$100, all of which is allocated to the Unlevered Account 64. The leveredinvestors 56 invest $25, all of which is allocated to the LeveredAccount 66. For each dollar allocated to the Levered Account 66, a classloan is obtained from the prime broker for an equal amount, providing afirst level of leverage. In this example, a $25 class loan is made tothe Levered Account. In addition, a $200 margin loan is provided by theprime broker, providing a second level of leverage. Thus, the GeneralTrading Account is comprised of $100 in unlevered equity, $25 in leveredequity, a $25 class loan, and a $200 margin loan, resulting in a totalof $350 for investment.

As mentioned above, the levered and unlevered investors share in thereturns from the General Trading Account on a pro rata basis. Thus, inthis case, the levered investors will share in ⅓ (e.g.[$25+$25]/[$125+$25]) of the returns on the General Trading Accountwhile the unlevered investors would be entitled to ⅔ of the returns onthe General Trading Account.

FIG. 4 is an exemplary spread sheet that illustrates the investmentstructure in accordance with the present invention. In this example,unlevered investors make a capital contribution to the Master Fund inthe amount of $100. Levered investors make a capital contribution to theMaster Fund in the amount of $25. The prime broker makes a class loan tothe Levered Account of $25 and a margin loan to the General TradingAccount of $200. Thus, total assets in the account are $350 and thelevered investors' Pro Rata Percentage is 33.33%, while the unleveredinvestors' Pro Rata Percentage is 66.66%. The initial margin requirementwill be the sum of (i) the assets in the account multiplied by theminimum equity requirement (for purposes of this example, $350×10% or$35) plus (ii) the amount of any outstanding class loans divided by theLevered Account Pro Rata Percentage of the equity in the account($25/33.33% or $75). Thus, the margin requirement will be $110, but theequity in the General Trading Account is $150, so no additional marginis required.

In an exemplary scenario, it is assumed that the master fund then loses15% in value and its total assets will thus be reduced to $297.50 andthe margin requirement will be recalculated. The adjusted marginrequirement will be the sum of (i) $297.50×10% or $29.75 plus (ii)$25/33.33% or $75. Thus, the margin requirement will be $104.75. Becausethe equity in the account is only $97.50, additional margin of $7.25will be required.

To determine the allocation of the margin call, the prime broker willallocate the total assets in the General Trading Account between theLevered Account and the Unlevered Account based on the Pro RataPercentage. Thus, the Levered Account will be allocated $99.17 of thetotal assets and the Unlevered Account will be allocated $198.33. Thenthe prime broker will allocate the margin loan between the LeveredAccount and the Unlevered Account based on the Pro Rata Percentage,resulting in an allocation of $66.67 to the Levered Account and $133.33to the Unlevered Account. The prime broker will then allocate the $25class loan to the Levered Account.

The net equity in the Levered Account will equal (a) $99.17 minus (b)$66.67 minus (c) $25, or $7.50. The ratio of net equity in the LeveredAccount to total assets in the Levered Account will equal 7.6%(7.50/99.17). Because such ratio is less than the minimum required bythe prime broker, additional margin may be required by the LeveredAccount.

The net equity in the Unlevered Account will equal (a) $198.33 minus (b)$133.33, or $65.00. The ratio of net equity in the Unlevered Account tothe borrowed funds in the Unlevered Account will equal 32.8%(65.00/198.33). If such ratio is less than the minimum required by theprime broker, additional margin will be required.

On a periodic basis, the Pro Rata Percentages will be rebalanced. Inthis scenario, the 15% loss (i.e., $52.50) in value is allocated ⅓ tothe Levered Account and ⅔ to the Unlevered Account. The class loan andthe margin loans are reduced accordingly, resulting in equity in theUnlevered Account of $65 [100−(⅔×$52.50)], equity in the Levered Accountof $7.50 [25−(⅓×$52.50)], a class loan of $7.50 [25−(⅓×$52.50)], amargin loan of $164.10 [244.10×67.23% (the portfolio loan to valueratio)], and total assets in the General Trading Account of $244.10[164.10+65.00+7.50+7.50]. The Levered Account Pro Rata Percentage is now18.75% The margin requirement also will be recalculated.

The adjusted margin requirement will be the sum of (i) $244.10×10% or$24.41 plus (ii) $7.50/18.75% or $40.00. Thus, the margin requirementwill be $64.41. Because the equity in the account is $80.00, noadditional margin will be required.

In the event of an additional capital contribution to the fund or aredemption of capital from the fund, the Pro Rata Percentages will berecalculated in a similar manner. FIG. 4 illustrates a $4.00 redemptionby the Levered Investor. The levered equity is reduced to $3.50,resulting in a reduction in the share loan to $3.50, and a reduction inthe margin loan to $147.69 [219.69×67.23%]. The new Pro Rata Percentageis 9.72% [(3.50+3.50)/(65.00+3.50+3.50)], resulting in a reallocation ofthe margin loan between the Levered Account [$14.36] and the UnleveredAccount [$133.33]. The margin requirement goes down from $64.41 to$57.97, while total equity is reduced to $72.00 [65.00+3.50+3.50], so noadditional margin is required.

An alternative investment structure could be utilized in the context ofa fund of funds 70, as generally illustrated in FIG. 5. Multiple classesof investors, such as unlevered investors 72 and one or more classes oflevered investors 74, may invest in an investment fund or fund of funds70. The fund of funds 70, in turn, invests in multiple investment funds76, 78 and 80, rather than directly undertaking trading activity. Inthis structure, the investment fund 70 establishes a credit facility 82with a lender 84, rather than opening a prime brokerage account with aprime broker. The credit facility 82 provides for least threesub-accounts, for example: one or more Levered Accounts 86, an UnleveredAccount 88 and a General Account 90. In this case, the lender 84provides class loans to the Levered Account 86 and separate loans to theGeneral Account 90. The General Account 90 will then be used to fundinvestments in separate investment funds. To the extent class loans areprovided to the Levered Account 86, levered investors 74 willparticipate in the returns on the General Account 90 as if the leveredinvestors 74 contributed capital plus any class loans made to thatLevered Account 86. The unlevered investors 72 will participate in thereturns on the General Account 90 on the basis of their capitalcontributions alone. The lender 84 will have no recourse against anyassets of any account other than the Levered Account 74 as a result of adefault by the Levered Account 74.

Obviously, many modifications and variations of the present inventionare possible in light of the above teachings. Thus, it is understoodthat within the scope of the appended claims, the invention may bepracticed otherwise than specifically described above.

1. A structure for an investment fund, the structure comprising: a fundfor receiving contributed capital from at least two classes ofinvestors; and a prime brokerage account opened by said fund forreceiving said investment capital from said fund, said prime brokerageaccount formed with at least three sub-accounts including an unleveredaccount (if there is a class of unlevered investors), one or morelevered accounts and a general trading account, said prime brokerageaccount configured to receive two levels of leverage from a prime brokerin the form of class loans to said levered account and margin loans tosaid general trading account.
 2. The investment structure as recited inclaim 1, wherein said account is further configured to receivecontributed capital from at least one class of unlevered investors. 3.The investment structure as recited in claim 2, wherein said primebrokerage account is further configured with an unlevered account forsaid unlevered investors.
 4. The investment structure as recited inclaim 3, wherein said prime brokerage account is configured so that saidlevered investors share in the returns of the general trading account ona pro rata basis, as determined by including in such calculation anyclass loans made to said levered account.
 5. The investment structure asrecited in claim 4, wherein said investment structure is configured byway of a single prime brokerage agreement.
 6. The investment structureas recited in claim 1, wherein said at least two classes of investorsincludes one class of levered investors and one class of unleveredinvestors and said prime brokerage account is configured with one ormore levered accounts and an unlevered account.
 7. The investmentstructure as recited in claim 1, wherein at least two classes ofinvestors includes two classes of levered investors and said primebrokerage account is configured with a levered account for each class oflevered investors.
 8. A fund with multiple levels of leveragecomprising: a master fund configured to receive investment capital fromat least one class of unlevered investors and one class of leveredinvestors; a prime brokerage account formed with at least threesub-accounts; an unlevered account; a levered investor account and ageneral trading account, said prime brokerage account configured toautomatically provide class loans to said levered account as a functionof the investment capital invested by said levered investors; saidgeneral trading account further configured to provide a second level ofleverage to said general trading account as a function of thecontributed capital in said levered account and said unlevered accounts.9. The investment structure as recited in claim 8, wherein saidinvestment structure is configured by way of a single prime brokerageagreement.
 10. The investment structure as recited in claim 9, whereinsaid prime brokerage account is configured so that said leveredinvestors share in the returns of the general trading account on a prorata basis, as determined by including in such calculation any classloans made to said levered account.
 11. A method for forming aninvestment fund comprising the steps of: (a) establishing a master fundfor receiving at least two classes of investors; (b) enabling saidmaster fund to open a prime brokerage account; and (c) forming saidprime brokerage account with at least three sub-accounts—an unleveredaccount, a levered account and a general trading account; and (d)configuring said prime brokerage account so that said levered accountreceives class loans from a prime broker as a function of thecontributed capital in said levered account and margin loans from saidprime broker as a function of the total capital in said general tradingaccount.
 12. The method as recited in claim 11, wherein said investmentstructure is created with a single prime brokerage agreement.
 13. 1. Astructure for an investment fund, the structure comprising: a fund offunds for receiving contributed capital from at least two classes ofinvestors, said fund of funds investing in one or more investment funds;or a fund that employs alternative investment strategies that overlaythe basic trading strategies and a credit facility opened by said fundformed with the equivalent of at least three sub-accounts including anunlevered account (if there is a class of unlevered investors), one ormore levered accounts and a general account, said credit facilityconfigured to provide two levels of leverage in the form of loans tosaid levered account and loans to said general account.